Th2.6: Policies - Increased Incentives

Question 1

What are two ways the UK could increase incentives?

Answer 1

reduce benefits / taxes

reduce/remove the minimum wage

Question 2

What will the government be doing by increasing the incentive for people to go to work or firms to employ people?

Answer 2

increasing the size of the workforce, meaning more goods and services can be produced

Question 3

What will a reduction in benefits/taxes do?

Answer 3

increase the opportunity cost of being out of work and mean that people are always better off within work than on benefits

Question 4

What does Universal Credit do?

Answer 4

helps to ease the transition into and out of work

Question 5

What may a reduction in benefits prevent?

Answer 5

poverty/unemployment trap, where low income workers end up in the same or even worse position after they gain a job because of the benefits they lose

Question 6

How else can the poverty/unemployment trap be fixed?

Answer 6

by subsidising workers - lower income workers receive income tax credits instead of paying income tax

Question 7

What would reducing taxes on firms when they take on new staff, such as National Insurance contributions do?

Answer 7

increase incentive for these firms to employ

Question 8

What would a reduction/removal of the minimum wage do?

Answer 8

increase the incentive for firms to employ

Question 9

How could the government increase incentive for people to take risks or firms to invest?

Answer 9

by lowering taxes, which will mean people see a bigger return on their investment

Question 10

What is the problem with this reducing taxes/benefits?

Answer 10

people argue that a small change in tax will have little impact on people’s incentive to work. reductions of tax on high income earners will lead to more inequality and result in less revenue for the government to spend. reducing benefits will also increase inequality